Interested In Sangetsu's (TSE:8130) Upcoming JP¥77.50 Dividend? You Have Four Days Left
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Sangetsu Corporation (TSE:8130) is about to trade ex-dividend in the next 4 days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Sangetsu investors that purchase the stock on or after the 29th of September will not receive the dividend, which will be paid on the 1st of December.
The company's next dividend payment will be JP¥77.50 per share, and in the last 12 months, the company paid a total of JP¥155 per share. Calculating the last year's worth of payments shows that Sangetsu has a trailing yield of 4.8% on the current share price of JP¥3220.00. If you buy this business for its dividend, you should have an idea of whether Sangetsu's dividend is reliable and sustainable. As a result, readers should always check whether Sangetsu has been able to grow its dividends, or if the dividend might be cut.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Sangetsu paid out more than half (55%) of its earnings last year, which is a regular payout ratio for most companies. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the last year, it paid out more than three-quarters (88%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.
It's positive to see that Sangetsu's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
View our latest analysis for Sangetsu
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Sangetsu's earnings have been skyrocketing, up 29% per annum for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Sangetsu has lifted its dividend by approximately 13% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
The Bottom Line
Should investors buy Sangetsu for the upcoming dividend? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. That's why we're glad to see Sangetsu's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 55% and 88% respectively. In summary, while it has some positive characteristics, we're not inclined to race out and buy Sangetsu today.
While it's tempting to invest in Sangetsu for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 1 warning sign for Sangetsu that you should be aware of before investing in their shares.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.